Hi All ,
I am planning on traveling to the U.S in Jan 2015 with 150 k USD to create a property portfolio.
I aim on targeting houses based between 20k to 30 k that have tenants in place already with good payment history.
Before everyone starts with the "Ghetto" business on these houses , although they are likely not to be the most desired areas all the time or have the most desirable tenants all the time to me properties that have tenants that pay the rent and respect the property are what counts.
I'm working on the following figures , please tell me your thoughts and opinions :
Outlay
5 x houses average 30 k each = 150 k.
Average monthly rental income = 750 =45,000 PA
Outgoing operation costs
Yearly predicted
5 x property tax's average $ 850 = $4250PA
Property manager fee's = $5000PA
maintanince allowance= $6000PA
Net Operating income =$29750.
I have been studying the US market for years however I've just been in a position to raise the capital needed. I understand these are ball park figures but I need to set a target somewhere. I think I could increase that figure but there are factors that could decrease it also , I'm well aware.
I think its all about risk mitigation if I were to purchase properties that have long term good paying tenants in place I would reduce my risk of losses dramatically.
Any thought or opinions? I just think the Aussie market is so overpriced owning a home here myself I have no intentions of reinvesting in the market
Certainly sounds good in theory.
I took $100K with me in 2005 and purchased two places. Like your plan, they were both had potential. One succeeded, and one didn't. I pretty much lost $45K on one, which was put down to poor management at the time.
Luckily for us, since then, property management in the USA has come a long way.
They certainly do things differently there in the USA which you will pick up!
That's interesting , in 2005 prices would have been at their peak during their bubble.
Do you currently hold any properties there ?
In theory I can see why you would do this.. However I can absolutely 100% guarantee that your cash flow will not be what you think it will be. And you will NOT find good quality tenants that WANT to live in 30k houses.. Plain and simple end of discussion.
Now with that said… You could find those types of homes possibly in smaller cities in the mid west.. ones that are 1 hour from a major population base and are about 20 to 30k in population. there will be absolutely no capital growth. and rents will be better and more consistent than inner city homes at those prices. Also running costs on these homes after the honeymoon period ( recent rehab ) will run 50% of rent ….Having owned hundreds of these over the years in this asset class this is what you will experience. If you do better than 50% running costs then your very happy
Stepstomillions wrote:I have been studying the US market for years
Studying's one thing learning's another. Listen to Jay. He's forgotten more than you'll ever know.
Jay thanks for the insight , do you have any particular towns to share ?
im obviously new to this and any knowledge you can share with me is more valuable then anything.
Thanks heaps
I like Kokomo In as one… but 30k homes will rent for 500 to 600 not 750. and they will always be the same value.
Nah. One I sold at a loss. One I sold with a slight loss of around $7,000 but I made $10K in rent over the period I had it.
Jay,
Where is Kokomo?
Beach boys much? haha
Thanks
EngeloRumora | Ohio Cashflow
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If my view if you are targeting $30,000 houses you will not get much. I tend to focus on Florida which is a good market but generally to get anything worth while you need to look into the $50,000 to $70,000 range. Because we get them from the bank they are under retail price.
However Australia is full of US investors who have lost money. Most of them just do not know it yet.
The secret behind investing well in the states will be determined by who you are dealing with on the ground. American have a can do attitude however may of them talk big but do not deliver. The people on this post are experienced as am I . You would do well to get someone you trust on the ground and then take there advice. Do it on your own and do it at your own peril.
Nigel Kibel | Property Know How
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Thanks for the tips Nigel ,
Would you be able to give me some insight into your opinion on these properties ? Do you from this opinion due to tenant base ? Structure and maintenance etc ?
The Capitol growth is not my aim , my aim is for cash flow with the odd fix and flip.
Any advice anyone can provide further is greatly appreciated and taken on board definitely .
thanks all
As I mentioned it is important that you are working o the ground with someone you trust
If you do not do this then you are flying blind
Nigel Kibel | Property Know How
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Ok I understand ,
this will be my full time occupation as I will be based there permanently
i think increases my chances of success a lot , any thoughts ?
Unless you are a US citizen or you got a working visa, you can't work (I'm assuming you Australian) you will need to fund yourself, that will eat into your 150K.
@Engelo I am coming to Kansas City mid next month, ill come see you if you around.
Sounds good Ben,
Happy to catch up.
Have a great day.
EngeloRumora | Ohio Cashflow
http://ohiocashflow.com/
Email Me | Phone MeF@#$ THE REST WORK WITH OHIO CASHFLOW TO INVEST
To add my two cents worth to buying those cheaper places.
Everything mentioned above is correct…It's knowing that the people on the ground are honest, professional, and not out to sell a dud property to make a quick dollar from unwary overseas investors, and believe me, there are plenty of them that would do that, and then just try and get something fixed up or any issues resolved.
So very important, who you are dealing with on the ground, they will make or break you very quickly.
The areas are very important, you won't get a Roles Royce area, but you should still be able to get an okay area, certainly not a bad crime zone, and mostly in Cities it would be near the inner city areas, which can be good in some ways as they are usually near amenities and transport, but can attract the lower class tenants.
The next important thing is having the right Property Manager, who will work in those areas, who will vet the tenants thoroughly, and will be on top of things at all times.
As for the rents, yes, you can be lucky in some instances and get a higher rent, but mostly it would be in the vicinity of around $500 to around $750 for properties under or around $30,000, $600 would be quite possible.
And you can get some good rehabbed houses, but again, they are not that easy to find.
Having said all that, although i would normally never sell those cheaper end properties, I've sold a number of them to clients who requested buying those cheaper ones, and so far, they have all been very good, no complaints, and happy tenants and owners, in fact, one owner has a tenant wanting to now buy the place, a 4 x 2 fully rehabbed with new concrete parking area, that was brought for $27,000.
But there is a lot of really bad rubbish to sift through. I just happen to work with really good people on the ground, who did everything for the buyers.
So just to finish…be very cautious, check all bases, know who your working with or buying from. If buying direct yourself, do a lot of research on the people your buying from, and get to know the areas down to the street or even what part of the street if it's a very long one, and get to know the property manager….ASK A LOT OF QUESTIONS, If you don't get the right answers, WALK AWAY.
Hope that helped a bit.
I made a decision that the only way I would deal in the United States was that I owned half the company which I do
We also own a property Management company. From my point of view it means we can offer the service to a standard that I am happy with. Frankly unless you intend to spend a lot of time on the ground you are playing Russian Roulette. You need to understand the market and who you deal with will make all the difference as to whether your investment will be successful
Nigel Kibel | Property Know How
http://propertyknowhow.com.au
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Nigel now we are on the same page its the same reason I owned all aspects of my company….
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